Please provide guidance for quesitons 8 and 9 of Part C. Part C. For this part o

Question

Please provide guidance for quesitons 8 and 9 of Part C.

Part C. For this part only, assume FreshRoll’s total fixed costs (from all sources) in July are now predicted to be $48,000. Assume your answer to question 3 above (contribution margin per unit for a deluxe service guest) is $12 per guest. Assume FreshRoll has added a Standard service with simpler food and no beverages. All of the food is prepared ahead of time and the total labor time per guest is only .5 hours. The usual price for the Standard service is $29 per guest and you have computed a contribution margin per guest of $9 per guest.

8. Assume that in July Year2, FreshRoll plans to serve 2,000 Standard guests and 6,000 Deluxe Roller guests. Compute breakeven revenue for FreshRoll in July, assuming that sales mix.

9. Assume that FreshRoll learns in August that many of its employees are leaving to begin their own business in another state. As a result, FreshRoll predicts there will only be 3,000 total labor hours available in August. The projected demand in August is the same amount projected for July. How many guests of each type of party should FreshRoll plan to serve to maximize profits?

FreshRoll Catering provides a "Deluxe Roller service that has proven to be popular and attracts many repeat customers. FreshRoll provides high quality ingredients and the specially trained staff help guests roll sushi while enjoying cocktails and other prepared appetizers. The business is seasonal, with a heavy schedule during the summer months and holidays and a lighter schedule at other times The usual price per guest for the Deluxe Roller is $54. FreshRoll has estimated the cost per guest for the Deluxe Roller service as follows Direct costs $13.00 $ 6.00 18.00 Food Drink Labor (1 Overhead costs 1.67 Miscellaneous (1 hr. x 7.157.15 $45.82 Rent (1 hr. x$1.67) Total cost per guest Labor includes food preparation and service. Here is the detail of how the one-hour for labor in the table above was computed: FreshRoll provides 1 server/tutor for every 4 guests so that is.75 hours per guest for an average 3-hour party. Another 25 hours per guest is needed for the food preparation. These workers are hired only as needed and are paid only for the hours they actually work (The detail is for background only. You can trust my computation of 1-hour per guest.) Management elieves that the direct costs above are reasonably reliable. To compute the overhead costs per hour used above (Rent and Miscellaneous), management used the following summary of costs and labor hours over the last year. (Example: Total miscellaneous OH cost/total labor hours . $7.15 per labor hour.) Miscellaneous overhead includes accounting and legal costs, utilities, supplies and other miscellaneous items. LaborHours Misc OH Costs Rent Costs 2.800 March 3,000 8,000 Apri 200 34,800 2,300 June 8,000 8,600 1,800 7.500 7,000 tober 411,900 Total Per labor hour

Explanation / Answer

8 Contribution margin per unit delux service $12 Contribution margin per unit standard service service $9 Percentage of standard service=2000/(2000+6000) 0.25 Percentage of Delux service service=6000/(2000+6000) 0.75 Contribution margin per equivalent unit $11.25 (0.25*9+0.75*12) Fixed cost $48,000 Break even equivalent unit=(Fixed cost)/Unit contribution margin 4266.666667 (48000/11.25) Breakeven units of Standard service 1067 (4266.667*0.25) Breakeven units of Delux service 3200 (4266.667*0.75) Breakeven Revenue from standard service $          30,943 (29*1067) Breakeven Revenue from Delux service $        172,800 (54*3200) Total Break even Revenue for Freshroll in July $        203,743 (30943+172800) 9 Total labor hours available 3000 Labor hour per unit of standard service 0.5 Labor hour per unit of Delux service 1 Contribution per labor hour for standard service $18 (9/0.5) Contribution per labor hour for Delux service $12 (12/1) Contribution per nabor hour is higher for standard guests. Hence priority to be given for standard guest Projected demand for standard guest 2000 Labor hour required for 2000 nos. standard guest 1000 (2000*0.5) Balance hours vailable 2000 (3000-1000) Number of delux guests that can be served 2000 To MAXIMIZE PROFIT: Number of standard service 2000 Number of Delux Service 2000

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